The dollar was recently down 1.1% against the yen to Y107.49, its lowest level since September.

For years, investors have taken advantage of Japan’s ultra-low interest rates and inclination towards a weaker currency to borrow in yen and bet on higher yielding assets that are comparatively risky, a strategy known as the “carry trade.”

“If we move to a higher volatility regime, the yen just cannot continue to be a cheap currency,” Mr. Juckes said.

At the same time, the yen is also being buoyed by signs that the Bank of Japan is moving closer to unwinding years of easy monetary policy as Japan’s economy enjoys one of its best growth spurts in decades.

A small reduction in government-bond buying announced by the BOJ on Jan. 9 has helped fuel speculation that policy-tightening might be on the table this year, though some analysts said it was too early to view the move as a policy signal.

Expectations of even an incremental change in the BoJ’s policies could send the yen higher. Consider the euro, which has risen more than 17% against the dollar over the last year as the European Central Bank has geared up to tighten monetary policy in the eurozone.e